Payment processing solutions company Shift4 Payments (FOUR 9.11%) surged ahead 10% through 11 a.m. ET Tuesday after reporting mixed earnings this morning.
On one hand, Shift4 beat earnings forecasts soundly, reporting $1.07 per share in adjusted profit, where Wall Street expected only $0.95. On the other hand, revenue came up short. The company recorded $848.3 million, less than the $862 million analysts had forecast.
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Key Data Points
Shift4's Q1
Company president Taylor Lauber boasted record payment volume in the year's first quarter, $45 billion, calling payment volumes "healthy" and noting "recent political commentary and capital markets volatility have not translated into reduced consumer spending across our merchants."
Payment volume grew 35%, translating into 40% growth in gross revenue after network fees -- less than expected, but still quite healthy. Net income declined by 32% regardless, and adjusted free cash flow as calculated by the company was down 10% year over year at $70.5 million -- albeit the company's description of how it arrives at that figure is somewhat vague.
A more traditional measure of free cash flow, operating cash flow minus capital expenditures and capitalized software costs, could put FCF at anywhere from $46.6 million to $76.9 million.
Is Shift4 Payments stock a buy?
Turning to guidance, management expanded its range of possible outcomes this year slightly, forecasting revenue in the $1.66 billion to $1.73 billion range, which works out to 23% to 28% year-over-year growth -- slower than seen in Q1.
Management further noted that it expects adjusted free cash flow "conversion" rate to be about 50%. Again, this is a rather opaque and company-specific measurement. But applied to the company's forecast for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), it would appear to imply somewhere between $420 million and $432.5 million in FCF this year, valuing the $5.5 billion company at perhaps 13 times FCF.
While the math is pretty fuzzy, for any company growing revenue at better than 20%, that seems a good value.
